Cost Compliance: Not Everybody Does It, But Everybody Should

Win themes, discriminators, persuasive language, price to win, cutting edge solutions, graphics galore… these are the fun things that everyone wants to ensure grace their proposals from cover to cover. These items address the purpose of the solicitation and allow an offeror to show off their best side to the Government. These are all important and are the focus of many color-team reviews, strategic discussions, teaming arrangements and management meetings. After all, these are the areas that specifically relate to what the offeror does. However, there is one other key area that is a whole lot less fun to address but is no less important: Compliance. In the time crunch and limited budget environments to prepare the “fun” parts of the proposal, too many offerors will pay lip service to, or completely disregard, the compliance aspects of the solicitation. Surprisingly, this is especially true with cost proposals, which typically run on a separate track from the main proposal volumes.

A compliant cost proposal alone does not make for a fun read. It will not be compelling or trigger an emotional response in the reviewer, nor will it flow with the same voice as the other volumes. There is not much about making a cost proposal compliant that is actually an enjoyable experience. However, failure to address compliance early in your cost proposal process will have devastating effects during your proposal’s evaluation. While the aforementioned “fun” items can flow into your cost volume as well and will make a proposal enjoyable to read, a non-compliant proposal can get all of that hard work thrown out before the volumes are completely evaluated. In this regard, it is imperative that companies allocate adequate schedule, resources, and processes toward preparing compliant cost proposals. As stated by former U.S. Deputy Attorney General Paul McNulty, “If you think compliance is expensive, try non‐compliance.”

What Influences Compliance?

Compliance is not a behavior that a company can selectively apply and have repeatable success in the Govcon arena. Compliance must be ingrained in the company culture and all aspects of management, operations, finance, and business development. A contractor that practices compliance in all aspects of the business will understand the need to address all the requirements in a solicitation, and they will understand the consequences of not meeting those requirements. Common areas that successful contractors will adequately invest for cost proposal compliance are:

• Proposal Cost: Proposal budgets, staffing, and schedules will all factor in the cost of complying with the solicitation.
• Proposal Structure: The proposal is structured, and tailored as necessary, to clearly address all preparation, content, print, delivery and evaluation requirements.
• Support Information: Within the cost proposal, or as attachments, all required supporting documentation is gathered and logically organized.
• Corporate Costs: The company implements adequate systems, processes, and policies to enable creating supported, auditable proposals and all proposal participants are trained to ensure compliance with requirements.

Companies that do not embrace compliance will discover an assortment of other additional costs. A company can find their proposal rejected due to non-compliance, which promptly classifies all the Bid & Proposal costs as a wasted expense and the disqualification can be demoralizing to the staff that spent long nights and weekends to create the proposal. There is an opportunity cost where the time and budget spent on a non-compliant proposal could have been spent on other opportunities. Contracting offices will take note of companies that repeatedly fail to comply with their carefully crafted solicitation requirements. Additionally, failure to follow the basic, required steps to complete a compliant proposal do not project confidence that the contractor could faithfully deliver the required products or services once under contract.

Occasionally, a company will address compliance solely within the proposal process only to have post-award issues during contract execution. While it is possible to project compliance with a well-oiled “proposal machine,” companies that only comply enough to get an award may find themselves faced with a post-award termination due to lack of necessary systems, controls, processes, and trained personnel to faithfully execute the scope of work. There are few things worse on a past performance evaluation than contracts terminated for cause, and that termination will linger in future evaluations and impact the ability to win future opportunities.

What Best Practice Ensures Cost Proposal Compliance?

Regarding cost proposals, the best approach to ensure compliance is to utilize a Cost Compliance Matrix to shape the structure and content of the cost proposal. Many companies will build a compliance matrix for their technical, management, and past performance volumes, but will often not construct a matrix specifically for the cost volume. As the cost volume is seldom page limited, it is prudent to include the Cost Compliance Matrix within the cost volume itself, with cross-references to the proposal section where the RFP requirement is addressed. While it would seem obvious to create this matrix for the cost volume, it is amazing to see how many companies do not consider this a necessity when building their cost proposals.

The Cost Compliance Matrix will shape the structure, order, layout, and content of the cost volume. As closely as possible, organize the compliance matrix and subsequent cost volume sections in the same order as Section L. After that, a careful review of the solicitation should be performed to extract any “shalls,” “wills,” or “musts” from the proposal instructions, usually from Section L and Section M. Offerors should address each requirement thoroughly and completely, leaving no doubt to the evaluator that the requirement has been satisfied. Additionally, when preparing a proposal, a company may find that there are requirements that are not applicable. In these situations, the Cost Compliance Matrix is a vital tool to communicate to the Government that the company acknowledges the requirement and explains why the requirement does not apply. By taking a proactive approach to requirements that do not apply, the company can assure the evaluator that the lack of response to the requirement is intentional, and not an error of omission.

Conclusion

Compliance is a culture that must be created and cultivated across all aspects of the business. Investment in tools, processes, training, and adequate proposal staffing and budgeting will ensure staff are generating compliant proposals and not running the risk of proposal disqualification or post-award termination. On every cost proposal, a Cost Compliance Matrix is an essential tool to clearly document cost proposal requirements and the location of the offeror’s response to the requirements. The Cost Compliance Matrix should be included in every cost proposal as an aid to the evaluator. It is in every company’s best interest to invest resources into compliance, since non-compliance has severe repercussions and should never be an option when pursuing Federal contracts. For additional reference on the mechanics of building a Cost Compliance Matrix, reference https://www.federalpricinggroup.com/back-to-basics-building-a-robust-pricing-volume-compliance-matrix.

About the author: Dan Fox is Partner and Principal Consultant at Federal Pricing Group, a firm focused on providing expert contract pricing to small and mid-sized federal government contractors and cost-related acquisition support services to federal agencies. You can find more resources like this article at https://www.federalpricinggroup.com/blog.